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Inadequate Infrastructure, FX Regulations Are Problematic Factors for Doing Business in Nigeria

Proshare

Friday, September 29, 2017 9:14AM / FBNQuest Research

Governments are wary of country league tables and indices, and the FGN will not be pleased with the findings of The Global Competitiveness Report, 2017-18, which was published this week by the World Economic Forum (WEF). Nigeria has moved two places up the league to no 125 (out of 137) but the report notes that its score has declined every year since 2012. This is a diplomatic way of saying that enough other countries have performed worse than Nigeria to enable it to rise up the table.

The WEF conducted a survey this year to determine the most problematic factors for doing business. In Nigeria’s case, in descending order the four leading factors were: inadequate infrastructure, fx regulations, access to financing and corruption. None come as a surprise although we wonder at the inclusion of fx regulations if respondents had witnessed the latest changes.

The success of such indices can be measured by the level of responses from governments. The previous administration set targets for Nigeria’s position in selected league tables. In our view governments can be distracted by the large number published, which often overlap. The WEF’s reports cover much of the same ground as the World Bank Group’s Ease of Doing Business reports. 

Governments can claim that they are already responding to issues raised. This week the presidential enabling business environment council in Abuja approved a new national action plan, known in the industry as NAP 2.0. The plan sets out 60 priority objectives to address many of the weaknesses identified in the WEF and World Bank reports. The weaknesses include securing construction permits, starting a business, getting electricity and getting credit. 

Would-be investors have to feel comfortable with their host authorities. China’s Huajian Group has invested heavily in shoe manufacturing in Ethiopia and is said to be considering a similar plant in Abia State. In Ethiopia it proceeded from its initial talks with the government to its first production at breakneck speed. Can it achieve the same (or close to it) in Nigeria? 

Of course there are some positives in the report to share, and we highlight some stronger rankings within the 12 pillars that make up the overall ranking: strength of investor protection (within institutions) at no 31, government debt (macro environment) at no 8, prevalence of non-tariff-barriers (goods market efficiency) at no 36, redundancy costs (labour market efficiency) at no 7 and domestic market size index (market size) at no 21. 




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